60.1K

Verified Solution

Link Copied!

QUESTION $3$

$(20$ Marks$)$

$3\mathrm{.}1$

REQUIRED

Study the information provided below and answer the following questions:

$3\mathrm{.}1\mathrm{.}1$ If the sales manager's proposal is rejected, calculate the total revenues at break$-$even by using the contribution margin ratio. $(4$ marks$)$

$3\mathrm{.}1\mathrm{.}2$ Calculate the additional expenditure that the company can afford to spend on advertising, in keeping with the sales manager's proposal. $(4$ marks$)$

$3\mathrm{.}1\mathrm{.}3$ Calculate the break$-$even quantity if the sales manager's proposal is accepted $($using the proposed new selling price and the increase in the advertising outlay$).(4$ marks$)$

INFORMATION

Denel Enterprises manufactures a product that sells for R$180$ each. The company presently produces and sells $120000$ units per year. Unit variable manufacturing expenses and variable selling expenses are R$90$ and $10\%$ of the sales price respectively. Fixed costs are R$4536000$ for manufacturing overheads and R$1944000$ for selling and administrative activities. The sales manager has proposed that the price be increased to R$216$ per unit. To maintain the present sales volume, advertising must be increased. The company's profit objective is $10\%$ of sales.

$3\mathrm{.}2$

REQUIRED

Study the information given below and answer the following questions independently:

$3\mathrm{.}2\mathrm{.}1$ If Dundee Limited wants to achieve an operating profit of R$972000,$ calculate the target sales value without using the contribution margin ratio. $(4$ marks$)$

$3\mathrm{.}2\mathrm{.}2$ Based on the expected sales volume, what sales price per unit will allow the company to break even? $(4$ marks$)$

INFORMATION

Dundee Limited is analysing whether its new product will be profitable. The following data is based on expected sales of $40000$ units:

$\backslash$table$[[$Variable manufacturing costs,R$3840000],[$Fixed manufacturing costs,R$1200000],[$Fixed marketing and administrative costs,R$420000]]$

The expected selling price is R$150$ per unit.

Answer & Explanation Solved by verified expert

See Answer